Intrinsic value of Eaton - ETN

Previous Close

$77.29

  Intrinsic Value

$106.18

stock screener

  Rating & Target

buy

+37%

Previous close

$77.29

 
Intrinsic value

$106.18

 
Up/down potential

+37%

 
Rating

buy

We calculate the intrinsic value of ETN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 33.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.43
  5.39
  5.35
  5.32
  5.29
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
Revenue, $m
  21,812
  23,275
  24,797
  26,381
  28,029
  29,745
  31,532
  33,395
  35,338
  37,365
  39,481
  41,690
  43,999
  46,411
  48,933
  51,572
  54,332
  57,220
  60,245
  63,412
  66,729
  70,204
  73,845
  77,662
  81,663
  85,857
  90,255
  94,868
  99,706
  104,780
Variable operating expenses, $m
  15,509
  16,423
  17,374
  18,363
  19,393
  20,465
  21,581
  22,745
  23,959
  25,225
  24,664
  26,044
  27,486
  28,993
  30,569
  32,217
  33,941
  35,746
  37,635
  39,613
  41,685
  43,856
  46,131
  48,515
  51,015
  53,635
  56,383
  59,264
  62,286
  65,456
Fixed operating expenses, $m
  3,383
  3,457
  3,533
  3,611
  3,690
  3,772
  3,855
  3,939
  4,026
  4,115
  4,205
  4,298
  4,392
  4,489
  4,588
  4,689
  4,792
  4,897
  5,005
  5,115
  5,228
  5,343
  5,460
  5,580
  5,703
  5,828
  5,957
  6,088
  6,222
  6,359
Total operating expenses, $m
  18,892
  19,880
  20,907
  21,974
  23,083
  24,237
  25,436
  26,684
  27,985
  29,340
  28,869
  30,342
  31,878
  33,482
  35,157
  36,906
  38,733
  40,643
  42,640
  44,728
  46,913
  49,199
  51,591
  54,095
  56,718
  59,463
  62,340
  65,352
  68,508
  71,815
Operating income, $m
  2,920
  3,395
  3,890
  4,406
  4,945
  5,508
  6,096
  6,711
  7,353
  8,025
  10,612
  11,349
  12,120
  12,929
  13,777
  14,666
  15,599
  16,578
  17,605
  18,683
  19,816
  21,005
  22,254
  23,566
  24,945
  26,394
  27,916
  29,516
  31,198
  32,966
EBITDA, $m
  5,369
  5,881
  6,416
  6,974
  7,555
  8,163
  8,797
  9,460
  10,153
  10,877
  11,636
  12,430
  13,261
  14,132
  15,046
  16,003
  17,008
  18,061
  19,167
  20,327
  21,546
  22,825
  24,169
  25,580
  27,062
  28,620
  30,256
  31,976
  33,783
  35,682
Interest expense (income), $m
  0
  419
  476
  536
  598
  662
  729
  799
  872
  948
  1,027
  1,109
  1,195
  1,285
  1,379
  1,477
  1,580
  1,687
  1,800
  1,917
  2,040
  2,169
  2,304
  2,445
  2,594
  2,749
  2,912
  3,082
  3,261
  3,449
  3,646
Earnings before tax, $m
  2,501
  2,919
  3,354
  3,809
  4,283
  4,779
  5,297
  5,839
  6,405
  6,999
  9,503
  10,154
  10,835
  11,550
  12,300
  13,086
  13,912
  14,778
  15,688
  16,643
  17,647
  18,701
  19,809
  20,973
  22,196
  23,482
  24,834
  26,255
  27,749
  29,320
Tax expense, $m
  675
  788
  906
  1,028
  1,156
  1,290
  1,430
  1,576
  1,729
  1,890
  2,566
  2,741
  2,926
  3,119
  3,321
  3,533
  3,756
  3,990
  4,236
  4,494
  4,765
  5,049
  5,348
  5,663
  5,993
  6,340
  6,705
  7,089
  7,492
  7,916
Net income, $m
  1,826
  2,131
  2,449
  2,780
  3,127
  3,489
  3,867
  4,262
  4,676
  5,109
  6,937
  7,412
  7,910
  8,432
  8,979
  9,553
  10,156
  10,788
  11,452
  12,150
  12,882
  13,652
  14,460
  15,310
  16,203
  17,142
  18,129
  19,166
  20,257
  21,403

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  34,899
  37,241
  39,676
  42,209
  44,846
  47,591
  50,451
  53,432
  56,541
  59,784
  63,170
  66,705
  70,398
  74,258
  78,294
  82,514
  86,931
  91,553
  96,391
  101,458
  106,766
  112,326
  118,152
  124,259
  130,660
  137,371
  144,409
  151,789
  159,529
  167,648
Adjusted assets (=assets-cash), $m
  34,899
  37,241
  39,676
  42,209
  44,846
  47,591
  50,451
  53,432
  56,541
  59,784
  63,170
  66,705
  70,398
  74,258
  78,294
  82,514
  86,931
  91,553
  96,391
  101,458
  106,766
  112,326
  118,152
  124,259
  130,660
  137,371
  144,409
  151,789
  159,529
  167,648
Revenue / Adjusted assets
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
  0.625
Average production assets, $m
  13,741
  14,664
  15,622
  16,620
  17,658
  18,739
  19,865
  21,039
  22,263
  23,540
  24,873
  26,265
  27,719
  29,239
  30,828
  32,490
  34,229
  36,049
  37,954
  39,949
  42,039
  44,228
  46,523
  48,927
  51,447
  54,090
  56,861
  59,767
  62,815
  66,012
Working capital, $m
  2,945
  3,142
  3,348
  3,561
  3,784
  4,016
  4,257
  4,508
  4,771
  5,044
  5,330
  5,628
  5,940
  6,266
  6,606
  6,962
  7,335
  7,725
  8,133
  8,561
  9,008
  9,478
  9,969
  10,484
  11,024
  11,591
  12,184
  12,807
  13,460
  14,145
Total debt, $m
  8,818
  9,921
  11,068
  12,262
  13,503
  14,797
  16,144
  17,548
  19,012
  20,539
  22,134
  23,799
  25,538
  27,356
  29,257
  31,245
  33,325
  35,502
  37,781
  40,168
  42,668
  45,287
  48,031
  50,907
  53,922
  57,083
  60,398
  63,873
  67,519
  71,343
Total liabilities, $m
  16,437
  17,540
  18,687
  19,881
  21,122
  22,416
  23,763
  25,167
  26,631
  28,158
  29,753
  31,418
  33,157
  34,975
  36,876
  38,864
  40,944
  43,121
  45,400
  47,787
  50,287
  52,906
  55,650
  58,526
  61,541
  64,702
  68,017
  71,492
  75,138
  78,962
Total equity, $m
  18,462
  19,700
  20,989
  22,329
  23,723
  25,176
  26,689
  28,266
  29,910
  31,626
  33,417
  35,287
  37,241
  39,282
  41,417
  43,650
  45,986
  48,431
  50,991
  53,671
  56,479
  59,420
  62,503
  65,733
  69,119
  72,670
  76,392
  80,296
  84,391
  88,686
Total liabilities and equity, $m
  34,899
  37,240
  39,676
  42,210
  44,845
  47,592
  50,452
  53,433
  56,541
  59,784
  63,170
  66,705
  70,398
  74,257
  78,293
  82,514
  86,930
  91,552
  96,391
  101,458
  106,766
  112,326
  118,153
  124,259
  130,660
  137,372
  144,409
  151,788
  159,529
  167,648
Debt-to-equity ratio
  0.480
  0.500
  0.530
  0.550
  0.570
  0.590
  0.600
  0.620
  0.640
  0.650
  0.660
  0.670
  0.690
  0.700
  0.710
  0.720
  0.720
  0.730
  0.740
  0.750
  0.760
  0.760
  0.770
  0.770
  0.780
  0.790
  0.790
  0.800
  0.800
  0.800
Adjusted equity ratio
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529
  0.529

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,826
  2,131
  2,449
  2,780
  3,127
  3,489
  3,867
  4,262
  4,676
  5,109
  6,937
  7,412
  7,910
  8,432
  8,979
  9,553
  10,156
  10,788
  11,452
  12,150
  12,882
  13,652
  14,460
  15,310
  16,203
  17,142
  18,129
  19,166
  20,257
  21,403
Depreciation, amort., depletion, $m
  2,449
  2,487
  2,526
  2,567
  2,610
  2,654
  2,701
  2,749
  2,799
  2,852
  1,024
  1,081
  1,141
  1,203
  1,269
  1,337
  1,409
  1,483
  1,562
  1,644
  1,730
  1,820
  1,915
  2,013
  2,117
  2,226
  2,340
  2,460
  2,585
  2,717
Funds from operations, $m
  4,275
  4,617
  4,975
  5,348
  5,737
  6,143
  6,568
  7,011
  7,475
  7,961
  7,961
  8,493
  9,050
  9,635
  10,248
  10,890
  11,564
  12,272
  13,014
  13,794
  14,612
  15,472
  16,375
  17,324
  18,320
  19,368
  20,469
  21,626
  22,842
  24,120
Change in working capital, $m
  190
  198
  205
  214
  222
  232
  241
  252
  262
  274
  286
  298
  312
  326
  341
  356
  373
  390
  408
  428
  448
  469
  492
  515
  540
  566
  594
  623
  653
  685
Cash from operations, $m
  4,085
  4,420
  4,769
  5,134
  5,514
  5,911
  6,326
  6,760
  7,213
  7,687
  7,675
  8,195
  8,739
  9,309
  9,907
  10,534
  11,192
  11,882
  12,606
  13,366
  14,164
  15,003
  15,883
  16,808
  17,780
  18,802
  19,875
  21,003
  22,188
  23,435
Maintenance CAPEX, $m
  -529
  -565
  -603
  -643
  -684
  -727
  -771
  -817
  -866
  -916
  -969
  -1,024
  -1,081
  -1,141
  -1,203
  -1,269
  -1,337
  -1,409
  -1,483
  -1,562
  -1,644
  -1,730
  -1,820
  -1,915
  -2,013
  -2,117
  -2,226
  -2,340
  -2,460
  -2,585
New CAPEX, $m
  -882
  -922
  -959
  -998
  -1,038
  -1,081
  -1,126
  -1,174
  -1,224
  -1,277
  -1,333
  -1,392
  -1,454
  -1,520
  -1,589
  -1,662
  -1,739
  -1,820
  -1,905
  -1,995
  -2,090
  -2,189
  -2,294
  -2,404
  -2,521
  -2,643
  -2,771
  -2,906
  -3,048
  -3,197
Cash from investing activities, $m
  -1,411
  -1,487
  -1,562
  -1,641
  -1,722
  -1,808
  -1,897
  -1,991
  -2,090
  -2,193
  -2,302
  -2,416
  -2,535
  -2,661
  -2,792
  -2,931
  -3,076
  -3,229
  -3,388
  -3,557
  -3,734
  -3,919
  -4,114
  -4,319
  -4,534
  -4,760
  -4,997
  -5,246
  -5,508
  -5,782
Free cash flow, $m
  2,674
  2,932
  3,207
  3,493
  3,792
  4,104
  4,429
  4,769
  5,123
  5,494
  5,373
  5,779
  6,204
  6,649
  7,115
  7,603
  8,116
  8,653
  9,217
  9,809
  10,431
  11,083
  11,769
  12,489
  13,246
  14,042
  14,878
  15,757
  16,681
  17,653
Issuance/(repayment) of debt, $m
  1,067
  1,103
  1,147
  1,193
  1,242
  1,293
  1,347
  1,404
  1,464
  1,528
  1,594
  1,665
  1,739
  1,818
  1,901
  1,988
  2,080
  2,177
  2,279
  2,387
  2,500
  2,619
  2,744
  2,876
  3,015
  3,161
  3,315
  3,476
  3,646
  3,824
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  1,067
  1,103
  1,147
  1,193
  1,242
  1,293
  1,347
  1,404
  1,464
  1,528
  1,594
  1,665
  1,739
  1,818
  1,901
  1,988
  2,080
  2,177
  2,279
  2,387
  2,500
  2,619
  2,744
  2,876
  3,015
  3,161
  3,315
  3,476
  3,646
  3,824
Total cash flow (excl. dividends), $m
  3,741
  4,035
  4,354
  4,687
  5,034
  5,397
  5,776
  6,173
  6,588
  7,022
  6,968
  7,444
  7,943
  8,467
  9,016
  9,591
  10,196
  10,830
  11,496
  12,196
  12,930
  13,702
  14,513
  15,365
  16,261
  17,203
  18,193
  19,233
  20,327
  21,477
Retained Cash Flow (-), $m
  -1,209
  -1,239
  -1,288
  -1,340
  -1,395
  -1,452
  -1,513
  -1,577
  -1,644
  -1,716
  -1,791
  -1,870
  -1,954
  -2,042
  -2,135
  -2,233
  -2,336
  -2,445
  -2,560
  -2,680
  -2,808
  -2,941
  -3,082
  -3,230
  -3,386
  -3,550
  -3,723
  -3,904
  -4,095
  -4,295
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  2,532
  2,796
  3,066
  3,347
  3,639
  3,945
  4,263
  4,596
  4,943
  5,306
  5,177
  5,574
  5,990
  6,425
  6,881
  7,358
  7,859
  8,385
  8,936
  9,515
  10,123
  10,761
  11,431
  12,135
  12,875
  13,653
  14,470
  15,329
  16,232
  17,182
Discount rate, %
  4.90
  5.15
  5.40
  5.67
  5.96
  6.25
  6.57
  6.89
  7.24
  7.60
  7.98
  8.38
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
PV of cash for distribution, $m
  2,414
  2,529
  2,618
  2,684
  2,725
  2,741
  2,731
  2,696
  2,635
  2,550
  2,225
  2,122
  2,001
  1,864
  1,716
  1,559
  1,397
  1,234
  1,075
  921
  777
  644
  525
  419
  329
  252
  189
  139
  99
  69
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Eaton Corporation plc operates as a power management company worldwide. Its Electrical Products segment offers electrical and industrial components, residential products, single phase power quality products, emergency lighting and fire detection products, wiring devices, structural support systems, and circuit protection and lighting products. The company’s Electrical Systems and Services segment provides power distribution and assemblies, three phase power quality products, hazardous duty electrical equipment, explosion-proof instrumentation, utility power distribution, power reliability equipment, and services. Its Hydraulics segment offers various power products, controls and sensing products, fluid conveyance products, filtration systems solutions, industrial drum and disc brakes, and golf grips. The company’s Aerospace segment provides hydraulic power generation systems, controls and sensing products, fluid conveyance products, and fuel systems for commercial and military use. Its Vehicle segment designs, manufactures, markets, and supplies drivetrain, powertrain systems, and critical components, including transmissions, clutches, hybrid power systems, superchargers, engine valves and valve actuation systems, cylinder heads, locking and limited slip differentials, transmission controls, fuel vapor components, fluid connectors, and conveyance products. The company serves industrial, institutional, governmental, utility, commercial, residential, information technology, renewable energy, marine, agriculture, oil and gas, construction, mining, forestry, material handling, truck and bus, machine tools, molding, primary metals, and power generation markets, as well as original equipment manufacturers and aftermarket customers of heavy, medium, and light-duty trucks, SUVs, CUVs, passenger cars, and agricultural equipment. Eaton Corporation plc was founded in 1916 and is based in Dublin, Ireland.

FINANCIAL RATIOS  of  Eaton (ETN)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate -100%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 0%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 0%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 0%
Asset Turnover 0
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 0%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 0%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 0%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 0%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 0%

ETN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ETN stock intrinsic value calculation we used $20404 million for the last fiscal year's total revenue generated by Eaton. The default revenue input number comes from 0001 income statement of Eaton. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ETN stock valuation model: a) initial revenue growth rate of 6.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.9%, whose default value for ETN is calculated based on our internal credit rating of Eaton, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Eaton.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ETN stock the variable cost ratio is equal to 71.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $3310 million in the base year in the intrinsic value calculation for ETN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Eaton.

Corporate tax rate of 27% is the nominal tax rate for Eaton. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ETN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ETN are equal to 63%.

Life of production assets of 24.3 years is the average useful life of capital assets used in Eaton operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ETN is equal to 13.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $17253 million for Eaton - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 433.3 million for Eaton is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Eaton at the current share price and the inputted number of shares is $33.5 billion.

COMPANY NEWS

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▶ Eaton Named Among Americas Best Employers by Forbes   [May-08-18 08:30AM  Business Wire]
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▶ Eaton Declares Quarterly Dividend Payable May 18, 2018   [Apr-24-18 10:00AM  Business Wire]
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